Health Insurance: What You Need to Know

The best place to get health insurance, of course, is from your employer. Group plans are typically cheaper, and your employer will probably cover much of the cost.

There are three main types of coverage you can choose from: H.M.O.s (health maintenance organizations), P.P.O.s (preferred provider organizations) and the newer option called an H.D.H.P. (high deductible health plan) paired with a savings account. A small number of companies still offer old-fashioned, fee-for-service plans, but their ranks are dwindling. Here’s what you need to know about the most common plans:

H.M.O.S provide comprehensive coverage at a low cost to the consumer. In general, you don’t pay any deductibles or co-payments for basic care (and if you do, they will be relatively low). But your choices will be limited. You can generally use only the doctors and hospitals within the H.M.O.’s network, though more plans are easing up on this restriction, and your designated primary-care physician will determine the level of care you require and when you need to see a specialist.

Pros: Low cost. Coordinated care.

Cons: A limited choice of providers. If you go out of network, for example to a specialist, you will probably not be reimbursed.

PREFERRED PROVIDER ORGANIZATION AND POINT OF SERVICE plans were created in response to consumer frustrations with the limitations of H.M.O.s. You can choose to go to network providers and pay a small co-payment, or go out of network and have only a portion — typically around 60 to 70 percent — of your costs reimbursed. The main difference between the two is that a point of service plan requires a referral from your primary care physician to see a specialist, while the preferred provider plan does not.

Pros: More flexibility than an H.M.O.; lower overall out-of-pocket costs than a fee for service plan.

Cons: It’s tricky to predict your costs unless you’re willing to stay within the network. Getting reimbursed for out-of-network claims can be a hassle.

HIGH-DEDUCTIBLE HEALTH PLAN Over the past few years, more employers have begun to offer the option to sign up for a high deductible health plan that is linked to a health savings account or health reimbursement account. Some employers may offer the high-deductible health plan on its own and allow the employees to set up a savings account with the bank of their choice.

The plans work like the preferred provider option, but the deductible is much higher — at least $1,150 for coverage of a single person and $2,300 for families. To compensate for the larger deductible, employers typically offer different two savings options:

A health savings account allows you to put away pretax dollars and then withdraw the money to pay your out-of-pocket costs. (Your employer may kick in some money, too.) In 2009, you and your employer can put up to a combined limit of $5,950 in a health savings account if you opt for family coverage ($3,000 for singles). The money rolls over from year to year, so you can basically store up a medical emergency fund. When you’re 65, you can take the remaining money out without paying a penalty, though you’ll pay taxes on the withdrawal if you’re not using it to pay for medical costs.

A health reimbursement account is financed solely by your employer. Typically, an employer will contribute an amount equal to about half the employee’s deductible The money rolls over from year to year, but you cannot take the money with you when you leave the company.

Pros: Low premiums. Tax-free savings (in the case of the health savings account).

Cons: Potentially high costs, especially if you or a family member becomes chronically ill. Don’t choose this option unless you have the money to pay the deductible.

INDEMNITY, OR FEE-FOR-SERVICE, PLANS are offered by fewer and fewer employers because of their expense. They allow you to go to any doctor, hospital or medical provider you choose. The plan typically reimburses 80 percent of your out-of-pocket costs after you fulfill an annual deductible.

Pros: Flexibility. You can go to any medical provider, anywhere, without seeking plan approval first.

Cons: Your total out-of-pocket costs will probably be higher than in a preferred provider plan or H.M.O. Most fee-for-service plans don’t cover preventive care like flu shots ormental health services.